Reflections on the election

Now that the glow from all that late night election-return television watching has faded, we thought we'd share some thoughts about the impact of the election on Maryland going forward.

The most important issue facing Maryland in the next three months is the looming fiscal cliff (or slope, as some have called it). Either the lame duck or the newly elected Congress will have to decide what, if anything, to do about expiring federal tax cuts and the mandatory spending cuts (known as sequestration) set for January. While both measures might help reduce the federal deficit in the short-term, the long-term effects would be devastating in human terms, and would likely push the country back into recession. The Washington Post has collected a number of graphics together to help explain the fiscal cliff at the national level.

In Maryland, the effects of falling off the fiscal cliff would be multiple. The state would see an immediate reduction in federal aid of $117.6 million (see pages 22-24) due to sequestration in fiscal year 2013. The state would also lose up to 53,500 jobs and $268 million in personal income and sales taxes, the largest local revenue sources for the state. This loss of revenue and increased demand for services by the newly unemployed would put significant pressure on the state's budget. The effect in later years would be even more severe.

Not to mention the cuts in federal aid to county and local governments.

Gambling expansion passed, and would raise some additional funds for the state. However, the increase in revenue for FY 2013 would be a bare $58 million, with not more than $200 million per year by 2017.Plus - the Department of Legislative Services' budget projections assumed that the referendum would pass. So the money is not "extra." it's already accounted for in the projections.


It seems unlikely that Congress will address the fiscal cliff before America falls off it. More likely is that the newly elected Congress takes up the issue after the fact early next year. It's unclear what the solution to the current gridlock might be, however. Voters mostly maintained the status quo last night. Democrats still control the White House and the Senate, while Republicans retained control of the House of Representatives. The hyper-partisan polarization that created the fiscal cliff will probably not abate.

Complicating matters for Maryland, the governor will likely have to present his budget to the General Assembly before the matter is resolved. The governor may reserve some amount in the budget to serve as a contingency for the fiscal cliff or it's resolution. or he may submit a budget in January based on the most reasonable assumptions, and leave it to the legislature to make adjustments as the budget bill works through the legislative process. If there is no answer when the legislature take final action on the budget in late march or early April (and that would be bad), then the Governor may propose adjustments to the budget for approval by the Board of Public Work after the budget is enacted.

In short, the national election - whatever else it accomplished - has done little to reduce Maryland's level of budget uncertainty.